Invoice financing requests surge as businesses are forced to pay up

invoice financing

Recent data from finance services provider OptiPay has revealed a two-fold increase in enquiries from businesses requesting invoice financing, which is a revolving line of credit against unpaid invoices.

OptiPay notes this increase was noted after the ATO announced it was resuming tax debt collections, with businesses looking to improve their cashflow in the wake of the annoucement.

Angus Sedgwick, CEO at Optipay, commented that they are seeing the biggest interest coming from manufacturing and wholesale trade industries, as invoices are still taking on average 15-20 days past the due date to be paid.

“Many companies with annual revenue between $2.0m and $50+ million are trying to fix their cashflow quickly as the ATO has begun contacting businesses individually and with some being issued with demands for payment to restart their overdue tax obligations after exercising leniency during the pandemic, revealing the amount of debt owing to the ATO has climbed 14 per cent from the same time last year to over $40 billion,” said Sedgwick. “During COVID the average advance rate of total invoice value dipped to under 50 per cent of the facility availability, as the ATO was not collecting tax, but was in fact handing out cash. This rate has now climbed back up to around our long term average of 68 per cent and is expected to go higher with the continued delays in customer payments and current supply chain issues many businesses are experiencing.”

“It’s about accessing tomorrow’s cash today so instead of a business having to wait 30+ days to be paid by their customers for goods or services delivered, Invoice fnance allows businesses to access up to 90 per cent of the amount invoiced to their clients front, with the balance less a small fee received with the client/debtor pays their invoice,” he added. “Businesses can typically access up to 90 per cent of their sales revenue within 24 hours of issuing the invoice. Unlike more traditional business loans there are no ongoing repayments back to the financier as they are repaid when the debtor makes payment of the invoice/s. The fee paid to the financier usually ranges from <1 per cent up to 3 per cent of the invoice value”.

OptiPay noted that In the USA, UK and Europe, invoice financing is one of the most utilised types of business finance due to its ease and flexibility of use, whereas in Australia it’s estimated that less than 5,000 SMEs out of over 65,000 eligible businesses that utilise invoice funding

“During the height of the pandemic, the ATO wasn’t collecting debt so for businesses who weren’t paying their BAS or PAYG each quarter that was giving them a fair amount of extra cashflow. Now that the ATO has come knocking – businesses are looking for ways to improve their cashflow in order to meet their statutory debt obligations to the ATO” said Sedgwick. “Invoice financing is popular amongst wholesale, manufacturing, transport & logistics, labour-hire, and services businesses. So essentially any business that invoices another business for goods or services on credit terms.”